Core Viewpoint - Delta Air Lines is perceived as a potentially undervalued stock due to its low price-to-earnings ratio of just over 8 times earnings, despite concerns over its adjusted net debt of $16.9 billion and the cyclicality of its revenue and earnings [1] Industry Profitability - The airline industry has historically struggled to generate a return on invested capital (ROIC) that exceeds its weighted average cost of capital (WACC), which is estimated to average around 8% to 9% [2] - Delta and United Airlines have achieved ROIC exceeding 8%, while American Airlines and budget carriers lag behind [4] Delta's Competitive Advantage - Delta and United Airlines are expected to be more resilient during economic downturns compared to budget airlines, as indicated by their superior ROIC [6] - Rising costs in labor, airports, and supply chains disproportionately affect budget airlines, which operate on low-cost and low-margin models [7] - Premium airlines like Delta can more easily adjust their offerings, such as providing economy seats, compared to budget airlines attempting to shift to premium services [7] - Delta benefits from substantial loyalty programs and additional revenue streams through co-brand credit cards, enhancing its financial stability [7]